ROME (AFP) - Italy coach Roberto Donadoni's two year reign ended on Thursday when he was sacked from the post following the world champions exit from Euro 2008 at the quarter-final stage.

Giancarlo Abete, president of the Italian FA met with Donadoni in Rome on Thursday where he told the 44-year-old of their decision, the FIGC website, www.figc.it, reports.

"In confirming to Donadoni his sincere personal gratitude and appreciation for the knowledge and professional manner in which he conducted himself during his time as coach to the national team, President Abete also let the coach know the FIGC's decision to end their relationship at the termination of his contract."

Donadoni's response to the announcement was brief and he continued to rue his luck in losing in a penalty-shootout to Spain.

"I am sorry that a penalty kick determined this situation. In the two years Italy also made positive strides, which the last match cannot remove," he told wire agency ANSA.

Donadoni initially dithered, then eventually signed a contract extension prior to Euro 2008, but it was dependent on Italy reaching the semi-finals and he refused to resign in the wake of their penalty shoot-out loss to Spain.

"Resign? The thought never even entered my brain. I don't have a reason, we only lost a game on penalties. You can't say things went well when you win, but don't work when you lose on penalties.

"We will talk and decide. It doesn't make any sense to talk about whether I decide to carry on or not."

Since the team returned from the tournament there has been constant press speculation that Donadoni would be removed from his position and Abete was conspicuous in his refusal to grant the coach a vote of confidence.

Earlier in the week Abete had said; "It is positive in terms of the quality of the group of players and I am delighted by the great bond created in the group.

"But we are aware that our overall capacity and skills have not matched the level we expected."

Then on Thursday he announced to La Gazzetta dello Sport that, "the contract is extinct."

Donadoni will no doubt look back and rue his luck. Firstly captain and defensive lynchpin Fabio Cannavaro was ruled out of the tournament with a knee injury, then in the quarter-final with Spain key midfielders Andrea Pirlo and Gennaro Gattuso were suspended and badly missed.

However, he was badly let down by his strikers, all six of whom failed to find the net, with all three goals scored coming from set-pieces.

FIGC will now set to work negotiating a compensation pay-off deal with Donadoni, with estimates putting the figure around the 550,000 Euro mark.

World Cup winning coach Marcello Lippi is widely expected to take over, having not returned to management since he resigned following Italy's success in Germany.

In the two-years following victory in Berlin the ex-Juventus and Inter Milan coach has worked for Sky Italia, but much of the time he has spent at his home on the Tuscan coast.

However, his presence has hung over the post-Euro 2008 inquests, with the Italian press immediately signalling their desire to see him return from his coaching exile the moment Italy exited Euro 2008.

Italy's next game is a friendly with Austria in Nice on August 20, with their opening World Cup 2010 qualification match against Cyprus on September 6 in Nicosia, followed by a home fixture against Georgia on September 10.